LivingSocial Not Going Out in Public

No. 2 daily-deals site trying to raise private capital instead

Despite all its drama, Groupon still is the dominant player in the daily-deals space. But that probably does not matter much. In light of the tough market conditions, it looks increasingly unlikely that Groupon will launch its IPO this year. No. 2 daily-deals player LivingSocial probably will share the same fate.

According to a Bloomberg report, it looks like LivingSocial instead will raise $200 million in private capital. JPMorgan (NYSE:JPM) is expected to lead the financing.

This is certainly a big letdown. After all, it was not long ago that LivingSocial was planning to raise at least $1 billion in an IPO, with a valuation of $10 billion. The company even was able to raise $400 million in April, including marquee investors like Amazon (NASDAQ:AMZN).

So now it appears LivingSocial is ramping down its expectations. But the company still needs the cash as it continues to navigate a brutally competitive environment. For instance, Google (NASDAQ:GOOG) remains committed to building a strong business in the space — the search giant recently purchased Germany’s DailyDeal.de, as well as restaurant reviewer Zagat.

Besides, the industry is showing signs of daily-deals “fatigue.” That is, users are getting a deluge of offers in their email boxes. Might they just eventually ignore them or unsubscribe?

As a result, LivingSocial is morphing its strategy, such as by focusing more on national brands. To this end, the company recently put together a daily-deals program for Whole Foods (NASDAQ:WFMI). While it is getting traction, the margins probably are low — at least compared to mom-and-pop merchants.

LivingSocial should be able to raise another round of capital. For the most part, the private market still is frothy. But the valuation might not necessarily hit the company’s goal of $6 billion. And with less cash in the treasury, it probably will mean LivingSocial’s growth rate will trail off even more.

Based in Silicon Valley, Tom Taulli is in the heart of IPO land. On a regular basis, he talks with many of the top tech CEOs and founders trying to find the next hot deals and finding out which start-ups are stinkers.

A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.

Tom is routinely quoted in the media about upcoming deals with his interviews on CNBC and Bloomberg TV, but he is eager to take your questions too. You can message him on Twitter at @ttaulli. And feel free to weigh in via the comments section on any of his IPO Playbook posts.